Spanish airline Iberia is suffering from higher oil prices but should still make a profit this year, the head of its main shareholder, Caja Madrid, said on Tuesday.
Iberia, 23 percent owned by Caja Madrid, a savings bank, made an operating loss (EBIT) of EUR28.3 million euros (USD$43.90 million) and net losses of EUR441,000 in the first quarter, hit by higher fuel costs and sharper competition.
"The situation at Iberia is complicated. It is being very affected by the price of oil, but it's not going to fall into loss," Caja Madrid Chairman Miguel Blesa said at a financial conference in Santander, northern Spain.
"The increase in the price of fuel is going to be passed on (to customers), but everything has its limit," he said.
Iberia chairman Fernando Conte has declined at recent public events to put a figure on the possible increase in fares because of the rising oil price.
The airline has hedged 48 percent of its fuel costs for 2008, at a price of USD$83 a barrel. In the same period last year it had hedged 50 percent at USD$61.5.
Blesa also said that Iberia and British Airways, which owns 13.5 percent of the Spanish airline, were in talks about a commercial alliance, but not a merger.
In April, the local government-controlled bank ruled out offering to sell British Airways its stake, after the Heathrow-based airline's failed bid for Iberia last year.
Blesa also said he hoped there would soon be an agreement over the merger of two other Spanish airlines -- Vueling and Clickair, in which Iberia holds 20 percent but with an option to raise its holding to 80 percent.
"The merger will be a good thing. The merger of smaller companies is essential. I expect there will be an agreement soon. Iberia will have an important role (in the new company)," he said.
